Twitter momentum grows with second straight profit quarter

Twitter reported two consecutive quarterly profits after years of hefty losses

Twitter reported its second consecutive quarterly profit Wednesday in a positive sign for the short messaging service after years in the red.

The San Francisco-based social network earned $61 million in the first three months of the year, boosted by strong growth in advertising revenue and modest gains in users.

First quarter revenues rose 21 percent from a year ago to $665 million, and the key figure of monthly active users increased by six million from late last year to 336 million.

Shares reversed pre-market gains and fell 3.9 percent to $29.25 in morning trade on Wall Street following the stronger-than-expected numbers.

Twitter stock has nearly doubled from a year ago, when concerns were high over the future of the service.

Chief executive Jack Dorsey said the recent changes made to the service have helped "engagement," a measure of how often people turn to the social network and how long they stay.

"We continued our work to make it easier for people to follow topics, interest and events on Twitter with new curated timelines of tweets around breaking news and sports events at the top of the home timeline, and launched new product features, including video time stamps and bookmarks to help people discover and discuss what's happening," Dorsey told a conference call.

Advertising remained the key driver of revenue growth for Twitter, rising 21 percent from a year ago to $575 million.

Ned Segal, Twitter's chief financial officer, said the company saw "growth across all major products and geographies in the first quarter."

- Beyond the core -

The move into profitability is an important achievement for Twitter, which has lost money consistently since its public offering, sparking speculation over whether it needed to sell itself to keep operating.

While Twitter has built a solid core base of celebrities, politicians and journalists, it has failed to match the broader appeal of Facebook and other social platforms, hurting its ability to bring in ad revenues.

The network has stepped up efforts to boost its user base and engagement, adding streaming video partnerships, doubling the character limit on tweets to 280 and making it easier to create "tweetstorms" by stringing messaging together.

It has also moved largely to an algorithmic-based feed using artificial intelligence that aims to deliver more tweets that drive interest and engagement.

Brian Wieser of Pivotal Research Group said the report showed "spectacular revenue growth driven by international activity," offsetting "tepid US results."

Wieser said Twitter is showing movement toward a "durable" platform but sees broader growth more difficult.

"As with Facebook, investor sentiment around Twitter will undoubtedly swing wildly around recent momentum in any given direction, making the stock itself riskier than the company in many ways," Wieser said in a research note.

- More positive outlook -

Debra Aho Williamson at research firm eMarketer said Twitter's ad performance has been improving and predicts the platform will take a 1.6 percent share of display ad revenue worldwide

She said eMarketer has increased its revenue estimates for Twitter "because we are seeing strong performance in its non-US mobile ad business, as well as better performance for direct response and video advertising."

Williamson added that Twitter's deal to stream content from the FIFA World Cup is likely to "create a more positive outlook for the company."

The earnings report comes with social networks under fire over protecting private user data and curbing so-called hate speech, fake accounts manipulating public debate and incitement of violence on their platforms.

Facebook, which was set to report earnings later Wednesday, has been under fire over the hijacking of private data on some 87 million users by a consulting firm linked to Donald Trump's 2016 campaign.

Dorsey said that at Twitter, "we believe privacy is a fundamental right for everyone," and that he does not anticipate the same kinds of issues as Facebook.

"We are different from our peers in that Twitter is public and... all of our data is out in the public, out in the open, and our data business just organizes that public data in real-time to make it easier for brands, researchers and organizations to utilize it," Dorsey said.

"We do not provide any personal identifiable information that's not already visible on the service."